A new market situation

History
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Presidential meeting. Björn Lundvall of Ericsson with the Brazilian Head of State.

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Ericsson had an international market orientation at an early stage. The company's specialized products and the limited Swedish market made international sales a prerequisite for continued growth. During the 1970s, Sweden was second only to the US in terms of telephone penetration, which made internationalization even more imperative. It is therefore not particularly surprising that Ericsson from the mid-1960s was among Sweden's three most international companies, as measured by the proportion of foreign employees.

In the early 1970s, Ericsson's Swedish customers accounted for about 25 percent of total sales. After the Swedish market, Europe was Ericsson's main market. Together, these two markets accounted for slightly more than 60 percent of the company's sales. In non-European markets, the company had achieved a strong position in Latin America. Production units had also been started in Mexico and Brazil in conjunction with large orders for the public telephone network.

The oil crisis changed these patterns, however. The economic problems that affected many countries in both Latin America and Europe led to postponement or cancellation of orders. The redistribution of wealth in the global economy, however, made it possible for new countries – primarily oil-producers – to develop their national telephone networks. Expansion in OPEC countries, however, was often delayed due to a lack of technical and administrative resources.

For Ericsson, the real breakthrough in these markets occurred in 1978, when Saudi Arabia signed the largest contract in Ericsson's history up until that time for expansion of the country's telephone network. Such large contracts were attractive for all companies, particularly since the contacts that were established between customers and suppliers often led to add-on sales that were often more extensive than the original order. The Saudi order was also a breakthrough for the computerized AXE system in the international market.

Traditionally, this type of order often resulted in the establishment of manufacturing operations in the purchasing country, primarily in the form of assembly plants for Swedish components. In this manner, it had been possible to adapt the finished product to national requirements, while basing manufacturing on Ericsson technology. With the breakthrough for more advanced computer-based technology, it was initially difficult to retain this system. The change-over to new technology took place first in the Swedish production plants.

In the early 1980s, interest increased for the American telecom market. The deregulation that had taken place enabled foreign companies to compete in this huge market. Together with the US oil company Atlantic Richfield, Ericsson established Anaconda-Ericsson Inc, which was one of the leading cable manufacturers in the US but also provided a springboard into the American telecom market. Together with Europe and the Far East, the US also provided a base for Ericsson's expansion during the 1980s, while the markets in the Middle East and Latin America stagnated. Despite extensive investments in modernization of the Swedish telephone network, the importance of the domestic market for Ericsson also decreased.

The breakthrough for mobile telephony during the 1990s meant a continuation of the development from the preceding decade. Western Europe, the US and the Far East were Ericsson's most important markets, and it was in these markets the greatest effort was made to strengthen the company's positions. With the rapid growth in these markets, Sweden's importance became relatively smaller.

The signing of the contract to install a new AXE based telephone system in the Kingdom. Joint Venture projekt between Ericsson and Philips. In the center Ericsson president Björn Svedberg.